Granted, emerging markets, with the newfound spending capacity of their fast-rising middle classes, do hold much promise.

However, companies that embark upon such expansion without a firm grasp of what makes an economy "emerging" can end up trapped in a complex maze, with unexpected -- and often unpleasant -- surprises around every corner.

A Broader DefinitionThe term "emerging market" has become defined almost exclusively along geographical lines. Whether BRICS (Brazil, Russia, India, China and South Africa) or any of the acronym's variations, the term generally refers to nations in the process of rapid growth and industrialization.

Nevertheless, many experts argue that the term is dangerously misleading, for emerging markets are clearly not a monolithic geographic grouping.

Understood this way, identifying institutional voids is key to seizing emerging opportunities. The more companies and investors know about institutional voids, the better chance they will have of overcoming major challenges.

Observe Emerging DemographicsBased on this logic, any sector or demographic within an economy, whether in the developing or developed world, can be considered "emerging."

Nueno cites the case of the global teenage market, which is already valued at around 750 billion euros annually. This demographic is on the rise, particularly in emerging economies.

With clothing, leisure and entertainment as favorite spending categories, "not only do teenagers constitute an important market niche of their own, but the success of many companies may lie in getting to know this demographic better," says Nueno.

Other Attractive Countries, Not Just the "Hot" OnesTo help companies and investors explore key questions in capital markets, IESE Prof. Heinrich Liechtenstein, together with coauthors Alexander Groh and Karsten Lieser, recently published the annual Venture Capital and Private Equity Country Attractiveness Index, covering 118 countries worldwide.

Their index reveals recent strong investor interest not only in the BRICS but also in other emerging economies such as Turkey, Mexico, Indonesia, Nigeria and the Philippines, suggesting that investors would do well to expand their vision beyond what are often touted as the "hot" markets.

That said, their study highlights the risks of these emerging markets, most notably in relation to the disequilibrium between exceptional growth opportunities and advanced financial market infrastructure.

More Than GDP GrowthTo make the best investment decision possible, IESE Prof. Javier Estrada recommends avoiding the temptation to focus exclusively on the fastest growing economies abroad, as measured by GDP.

Refining Your ApproachOne way that managers can ensure they are going in with their eyes open is through education and professional development. Programs for Leadership Development or Global C-Suite Programs can help executives understand how to identify new opportunities from various angles, including how to analyze new investment opportunities.

Regardless of where emerging paths to growth lie, a new framework can help companies and investors find promising opportunities in unexpected places.

Certainly, successfully seizing an emerging opportunity is a complex business with no one-size-fits-all formula. At home or abroad, success depends on knowing which questions to ask and adjusting value propositions to the markets, rather than vice versa.

This article is based on:
Emerging Markets: What to Know Before You Go
Year:
2013
Language:
English